The *Slow* AI Meltdown is Worsening.

The *Slow* AI Meltdown is Worsening.

Summary

~1.0 min read
The market presents a dichotomy: Nvidia continues to dominate earnings, driving significant gains for AI-related stocks and boasting massive free cash flow, cementing its AI leadership. However, beneath this optimism, serious concerns about the private credit market are emerging. Liquidity is tightening, with Oracle's credit default swaps hitting 2008 highs, and private credit funds are under stress, selling for less than their worth. This paradox fuels "AI bubble" debates. Drawing parallels to 2007, initial bank collapses and private credit issues didn't immediately halt market rallies, but eventually led to the 2008 financial crisis. A key current risk is the plummeting value of Collateralized Loan Obligation (CLO) equity funds, down 15-35% in 90 days. These funds are crucial for fueling AI infrastructure, and their decline makes it harder to generate new private credit, indicating significant underlying stress. Understanding these risks is vital for navigating potential future market challenges.